Make Price Action Trading Work For You

If you’re a day trader, in the Delta Trading Group network or not, you probably know that price action strategies can allow you to turn a profit quickly over a short period of time. If you’re just getting into day trading, you might still be wondering how to make price action trading work for you. When it comes to this trading technique that allows a trader to read the market and make subjective trading decisions based on the recent and actual price movements, there’s no such thing as too much information.

The
Tools Of The Trade

Price action trading ignores the fundamental analysis factors and puts more focus on recent and past price movement, making it a strategy that’s dependent on technical analysis tools. Since it relates to recent history and past price movements, some of the best tools include:

Charts

Trend Lines

Price Bands

High and Low Swings

Technical Levels (support, resistance, and consolidation)

Other tools and patterns that are observed by the trader can be as simple
as:

Price Bars

Break-Outs

Complex Combinations

The trader can also use personal psychological and behavioral
interpretations and actions as tools in price action trades. While a technical
analysis scenario (like 15 DMA crossing over 50 DMA), can spark a
similar response and behavior in multiple traders, it is unlikely that two
traders will ever interpret a certain price action trade in the same way. Each
will have their own set of interpretations, rules, and behaviors of
understanding.

Taking Steps To Price Action Trading

Any trader can use price action trading tools and techniques. It’s an
approach that uses predictions and speculation, making it useful to retail
traders, speculators, arbitrageurs, and trading firms. It can be used on a wide
range of securities such as equities, bonds, forex, commodities, and more.

Most traders follow a two-step process to find patterns and opportunities.
First they identify a scenario, then they identify the opportunities within the
scenario. For example, if a stock is getting into a bull phase, it’s likely to
either overshoot or retreat, giving the trader a subjective choice that can
vary from one trader to the next. Price action trading can rely greatly on
technical analysis tools, but the individual trader makes the final call, which
allows for flexibility instead of a strict set of rules that must be
followed.

Why
Is Price Action Trading So Popular?

Price action trading is discouraged for long-term investments, but works better for short-to-medium term profit trades that are limited. Many traders view the market as following a random pattern, giving them no opportunities to define a strategy that will work in every scenario, every single time. But combining the technical analysis tools with recent price history to identify trade opportunities based on personal interpretation makes price action trading a popular way to come close. Though trading can provide a good opportunity for a profitable outcome, it’s the trader’s responsibility to understand, select, and decide upon what actions will meet the requirements to do so.